Senate leaders disagree on tax reform

Senate leaders gave wildly different assessments Tuesday of the Senate Finance Committee’s work on comprehensive tax reform.

Senate Minority Leader Mitch McConnell (R-Ky.) on Tuesday took a dim assessment of the efforts of Sens. Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) to wipe the tax code clean of loopholes and deductions and rebuild it piece-by-piece. McConnell worries that Democrats will exploit the effort to bring in more revenue — precisely the opportunity that Senate Majority Leader Harry Reid (D-Nev.) said piqued his interest.

Text Size

-

+

reset

Baucus and Hatch — the chairman and ranking member on Finance, respectively — are split in ways that reflect their parties’ beliefs about the basic goals of tax reform. Baucus promised Democrats on Tuesday that he is committed to raising new revenue in the process of rewriting the code. That idea is a nonstarter with Republicans in both the Senate and the House. Hatch and McConnell have both said that reform must be revenue neutral.

McConnell said he’s supportive of the idea of comprehensive tax reform nearly 30 years after President Ronald Reagan and Speaker Tip O’Neill cemented a deal in 1986. McConnell said that deal was successful because of an initial agreement that it would be revenue neutral and not “for the purpose of getting additional revenue for the government but rather for the purpose of lowering the rates of having a more competitive tax code that would benefit our entire country.”

The Senate’s top Republican worries that isn’t the goal this time around, and that makes a breakthrough nearly impossible.

“The dilemma we have here is that the president and a significant number of Senate Finance Committee Democrats have indicated this is mostly about raising revenue. So I don’t see how we get anywhere, candidly,” McConnell said. “The point of this ought to be to make our country more competitive, not to give the government even more revenue. So that’s the stumbling block for even getting started.”

Minutes after McConnell rained on the prospects of a sweeping tax deal, Reid praised Baucus for working earnestly with Republicans and said he is trying to move forward in the same vein that the Senate just cemented comprehensive immigration reform.

“He’s been really good at reaching out to all members of our caucus and he’s reached out to Republicans. I think that’s the way it should be done: Use the model of immigration,” Reid said. “He’s indicated on more than one occasion it’s an opportunity to raise revenue. So I support Baucus going forward. Having said that, we’re a long way from having something on paper.”

Last month, Baucus and Hatch started remaking the tax code from scratch. They are trying to create a blank slate, devoid of all existing tax breaks, credits and deductions. They have given senators until July 26 to defend the tax provisions they want to save.

The blank slate approach is intended to be a foundation for an eventual overhaul of the entire code. It would be nearly impossible to actually eliminate every single benefit already in the code. Many popular provisions like the mortgage interest deduction and incentives for education and charitable giving are popular across the political spectrum. Still, many senators are skeptical of the process.

Baucus has been at the center of a flurry of tax reform activity this week. He just returned from a tax-focused trip to Minneapolis with House Ways and Means Committee Chairman Dave Camp (R-Mich.).

The event was the first in a series of road trips to build public support for their reform efforts. The pair also shared burgers and beers on Tuesday with a bipartisan group from both the House and Senate. The group of about a dozen tax writers got together at Kelly’s Irish Times to talk taxes and build relationships between members of both committees.